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Americans started the 2020s buoyed by their strongest-ever sense of financial well-being, according to the fourth-quarter personal financial satisfaction index, published Thursday by the American Institute of CPAs.

The PFSi reached 40.2 in the fourth quarter, 1.6 points above the previous record set in the 2019 first quarter, and up 2.9 points from the third quarter.

This was the seventh time in the last 10 quarters the index reached a new high.

The PFSi is calculated every quarter as the Personal Financial Pleasure Index minus the Personal Financial Pain Index, with positive readings indicating that Americans are feeling more financial pleasure than pain.

New Records 

The Pleasure and Pain Indexes each comprise four equally weighted proprietary and public economic factors that measure growth of assets and opportunities — the Pleasure Index — or their erosion — the Pain Index.

The Pleasure Index rose 2.5 points in the fourth quarter to a record high of 74.9, narrowly eclipsing the previous record of 74.8 set in the 2018 third quarter.

The biggest factor driving the quarter-over-quarter advance of the PFSi, accounting for 33.1% of its total value, was the PFS 750 Market index, an AICPA proprietary stock index composed of the 750 largest companies trading on the U.S. market. Thanks to the late 2019 stock market surge, it hit a record high of 99, up 9.1 points from the third quarter.

“The stock market’s performance over the last decade is a perfect example of why it’s important to remain focused on the long-term goals of your financial plan,” David Stolz, chair of the AICPAs’ PFS credential committee, said in a statement. “If you had gotten out of the market or moved into more conservative assets after the Great Recession, you would have missed out on the decade’s big gains.”

The positive gains to the overall PFSi were boosted by the lower overall value of the Pain Index, which decreased 0.5 points from the third quarter to 34.7.

This slight decline resulted from drops in the underemployment factor, to a record-low reading of 30, and the loan delinquencies factor, to 26. These outweighed increases in pain from the inflation and taxes factors, which measured 35 and 48.

Entering 2020 vs. a Decade Ago

Americans’ current robust financial satisfaction contrasts dramatically with that of a decade ago when many were reeling from the recession.

In 2009 fourth quarter, financial pain significantly outweighed financial pleasure and as a result, the PFSi measured -29.6, indicating that average Americans were feeling very dissatisfied with their financial health.

Over the course of the decade, all factors of the Pleasure Index increased significantly. But the tremendous improvement in Americans’ personal financial satisfaction in the last decade resulted mainly from the massive decrease in loan delinquencies.

Mortgage delinquencies fell from 9.5% to 2.5%, and bank loan delinquencies from 6.9% to 1.5%, according to the AICPA.

The two labor market-related factors — job openings per capita, a Pleasure Index factor, and underemployment, a Pain Index factor — were in close contention for having the next biggest positive influence on the overall PFSi.

Underemployment started the decade at an all-time high and 10 years later, it is at an all-time low. According to the underlying Bureau of Labor Statistics data, job openings shot up from 2.4 million to 7.4 million, a 204% increase.

Even though the PFS 750 Market index is experiencing a record-long bull market, helping it go from a total value of $13 trillion to $34 trillion, it had only the fourth biggest effect on improving the average Americans financial well-being over the last 10 years, the AICPA said.

“It is encouraging to see such a relatively high number of Americans making loan payments on time, all while building up equity in their homes,” Michael Landsberg, member of the AICPA personal financial planning executive committee, said in the statement. “However, it’s important to keep in mind the lessons from the Great Recession. This is the perfect time to review all your debt obligations and make sure that you’re not overextended.”

The only factor that did not improve the overall PFSi this past decade was pain from personal taxes. This Pain Index factor increased, and at 48 is nearly double what it was when the 2010s started.

The AICPA also noted that at the beginning of the 2010s, taxes were low on a temporary basis as part of an economic stimulus package.

— Check out CPA Execs Tighten Forecasts for Profit, Revenue Growth in Q4 on ThinkAdvisor.